Tuesday, October 14, 2008

Entrepreneurship: Why Everyone in an Enterprise Can -- and Should -- Be a Leader

Why Everyone in an Enterprise Can -- and Should -- Be a Leader

Leadership doesn't just start at the top. Leaders can also be found at the bottom of an organization and at just about every place in between. In this special report by Knowledge@Wharton and The McKinsey Quarterly, the management journal of consulting firm McKinsey & Co., experts from McKinsey and Wharton point out that regardless of whether people are on the top line or the front line, they should explore ways to exercise their leadership potential to the fullest. That is the only way in which they can create meaningful working lives for themselves and the organization can get the most from their efforts.

It is said that leadership starts at the top. This is often true, of course, but it is far from being the whole story. Leaders can also be found at the bottom of an organization and at just about every place in between..

Indeed, management experts at Wharton and McKinsey say that leadership can be found and must be practiced by employees at all levels of an organization. That is the only way in which an enterprise can get the most from managers and employees alike, achieve its strategic goals, fulfill the personal career aspirations of its people, and lay the groundwork for identifying and developing future leaders, including those who may eventually serve at the highest levels. A payroll clerk who recommends a way to streamline the process of cutting a check is demonstrating leadership -- given the parameters of his or her place in an organization -- in the same way as a CEO who is launching an initiative to transform a corporation.

“Everybody can lead at every level; there are no excuses,” says Michael Useem, director of the Center for Leadership and Change Management at Wharton and the author of many articles and books on leadership. “It doesn’t matter if you’re on the front line or the top line. If you are given an office with the powers of that office, what do you add to the office above and beyond those powers? Do you excite and motivate people? Do you bring excellence and vision to what ultimately is the objective of that office or even the whole company? Everybody should be good at leading, whatever their level in the hierarchy.”

“Everyone can exercise leadership by being an individual contributor at any level of an organization,” agrees Helen Handfield-Jones, an independent consultant on leadership talent strategy and co-author of the book The War for Talent. “What does that mean? Ultimately it comes down to looking for opportunities to make the world a better place. That sounds grand, but when people apply that idea to their work situations, it means having a vision of how your unit, or you as an individual, can be more effective and creative, go beyond day-to-day requirements, and energize others around that vision.”

Keith Leslie, a principal in McKinsey’s London office, notes that in recent years many business people and business journalists have become enamored with the idea of the “heroic” leader -- the super-talented individual who single-handedly shepherds his or her organization to new heights.

While powerful, charismatic individuals can make a difference, it is usually leadership teams, not the lone wolf, which prove essential to organizational success. In a 2001 article in The McKinsey Quarterly titled “Teamwork at the Top,” Leslie and two co-authors underscore this point by including a statement by former General Electric CEO Jack Welch, who says of GE: “We’ve developed an incredibly talented team of people running our major businesses, and, perhaps more important, there’s a healthy sense of collegiality, mutual trust, and respect for performance that pervades this organization.”

“The emphasis that we at McKinsey place on team leadership is applicable to management teams at all levels -- top, middle or front line,” says Leslie. “There are two reasons we disagree with the view that leadership means a heroic leader who will bring the organization to the future. One, we observe lots of different kinds of people being successful leaders. I have some very successful CEOs as clients who are introspective and data-oriented. Those kinds of people can be just as effective as big-message, extroverted types. The second thing we observe is that there are people who are great leaders in one institution but not elsewhere. Quite a few chief executives have moved from one company to another and not struck gold twice. The reason is that context really matters. Having the right fit for leadership activity is incredibly important.”

Both Useem and Handfield-Jones emphasize that leaders are made, not born. “There is no born leader as such,” says Useem. “Leadership at the front, mid and top lines alike is not innate. It is true some people have a huge head start. They’re exceptionally clear minded. They communicate well. They’re exceptionally persuasive. They look physically like a leader should, at least in the idealized Hollywood version. But the real skills of leadership at every level must be acquired in our lifetimes. There are no biological advantages. You have to learn those skills. And any organization, by implication, has to provide a chance for everybody to be a leader.”

Organizations can help managers and employees become leaders in a variety of ways: encouraging people to read histories, study biographies, carefully observe leaders around them, and engage in lifelong education. Organizations can also mentor people and help them discover, in their own way, how they can improve. Perhaps the most important thing organizations can do is encourage people to get out of their “comfort zones” and take on new tasks and challenges.

Leading in Different Ways

While everyone in an enterprise can demonstrate leadership skills, middle managers and other people in non-executive positions must lead for different purposes and by different means than CEOs and other senior executives. No one suggests, for example, that a middle manager can influence a company’s strategic direction to the same extent as a chief executive. But non-executives can readily find ways to make their influence felt.

Wharton management professor Anne Cummings agrees with Useem and Handfield-Jones that all employees can be leaders, even those who have no one reporting to them. All employees can exert what Cummings calls “horizontal” leadership -- leading in a setting where a person does not have the formal authority that is bestowed by a supervisory relationship.

“There is a set of skills and capabilities that are useful at the lowest levels; you exert it through your peers and in team settings,” Cummings says. Leadership in the lower ranks can involve everything from prioritizing tasks and managing time to getting people to accomplish goals and resolving conflicts. Such commonplace actions are important because they help an organization at any level meet its goals.

The essential set of skills for a senior executive -- character and integrity; the ability to think strategically; the ability to communicate and persuade; decisiveness and thoroughness in execution -- should be manifested by all employees. But they are exercised differently, and are narrower in their scope and influence, by people lower in the ranks. “If you’re an associate at Wal-Mart, you don’t look to change the entire corporate system,” according to Cummings. “You do what you can do to improve things where you are.”

Consider the differences and similarities involved in how senior executives and middle managers approach communications. Senior executives must communicate a company’s overall strategy to investors, securities analysts, politicians and other external constituents. Internally, executives must be adept at communicating through channels ranging from an e-mail to one person to an on-stage presentation in front of thousands of employees.

Mid-level managers, on the other hand, are almost never responsible for talking with political leaders or Wall Street analysts. Their public persona, if they even have one, is unimportant because typically their communication is done internally and to small groups of people. Yet the fundamental communication tenets of clarity and persuasion, accompanied by a healthy sense of ethics, should shine through even if everything is done, more or less, with a handshake and eye-to-eye contact, according to Useem.

Like senior executives, non-executives can demonstrate leadership by taking into account three important themes in making decisions: direction, interaction and renewal. Leaders look at the direction in which they are trying to take their business, according to Leslie, the McKinsey consultant. Leaders ask the right questions about overall organizational performance and how teams work together to improve performance. Leaders set clear goals for their businesses as a whole. They then work to institute processes that revitalize the effort and commitment of the people they work with. Effective leaders are rarely satisfied. They continually ask: What is the next level of improvement?

Middle managers and others can also exhibit leadership by “leading up,” according to Useem, who is the author of a book of that title. Leading up means offering new ideas and new directions to one’s superiors. Leadership is not a matter of how many subordinates one has; it is “a calling to help the organization go in the right direction, which means leading up.”

Look for Challenges

People who wish to strengthen their leadership skills should seek out challenging experiences. “Put yourself in situations you’ve never been in before,” says Handfield-Jones. “If you’ve spent three to five years in one business unit, make a change. Lead a mature business, then a start-up business. Learn to lead in a line position, then put yourself in a staff role. You also have to seek out feedback, coaching and mentoring, so you can reflect on your own leadership style and learn about yourself as you go along.”

As leaders grow and take on greater responsibilities, it becomes necessary for them to begin nurturing future leaders. Yet this is one of those responsibilities that appears obvious yet is often neglected, according to Handfield-Jones. “Managers and executives think developing talent is what HR does. That’s not true.”

Indeed, while many major companies have formal leadership development programs, employees who seek to grow as leaders and be recognized for their leadership capabilities should not rely solely on these programs.

“It’s generally recognized that if you want to retain talented junior executives you have to give them opportunities to grow or develop,” Cummings says. “Most companies these days have some sort of leadership development program, but just how well organizations actually support these programs varies. These programs have to be in place, but having them in place is not enough. I’m hearing more and more that formal mentoring programs don’t necessarily work. It’s the informal development of people that may matter more.”

A Reluctance to Lead

Useem notes that people occupying the middle and lower levels of organizations sometimes resist, or even resent, bearing the mantle of leadership. Leadership is something for senior people to do, the thinking goes, and, after all, the rank and file are not paid to lead anybody. “Yes, you often hear people say those kinds of things: ‘They pay the execs at top level the big bucks to be leaders. But I think it’s a misstatement of what is required. Your leadership will have less impact at a lower level, by definition. Therefore you’re paid less. But leadership, in my view, is still obligatory on the part of everyone.”

Robert Felton, a McKinsey director and manager of the firm’s Seattle office, has had extensive experience studying change management. He says organizations that wish to improve and adapt with the times may find that middle managers are not only unwilling to act as leaders in fostering change but will actually work to thwart it -- not out of malice but out of inertia and a stubborn unwillingness to think and act in different ways.

It may seem counterintuitive, but when it comes to identifying and tackling problems, senior executives and front-line employees, along with their immediate supervisors, are often the groups of employees who see eye-to-eye on the need for action. The stumbling block to fixing what is wrong frequently is middle management.

“The problem comes in the middle,” says Felton. “The middle manager, in my view, tends to overcome many, many change initiatives from both directions. CEOs are trying to change things from top, and front-line people are trying to change things from the bottom, and middle managers kill it. The middle manager is generally the enemy of serious change.”

To avoid this situation, Felton suggests that organizations recognize that they employ two kinds of middle managers. The first group consists of managers who possess neither the mettle nor the inclination to rise through the ranks but play vital roles because they have experience and know their jobs inside and out. The second group consists of people on the promotion track who may some day reach the senior level.

Both types of managers are necessary to organizations but both are also quite capable of thwarting necessary change if they find it in their interest to do so. If senior executives want to initiate change of any kind, Felton recommends that they form a special task force with the front-line folks who share the view that change is required and have them report directly to the senior people rather than middle management – at least until the task is accomplished and perhaps permanently.

Says Felton: “You need to create a partnership between the senior people and the front-line people -- and the front-line people need to be empowered. If they work for middle management, they will never be empowered.” Eliminating layers of middle management permanently can also reap rewards, as was famously demonstrated at General Electric under former chief executive Jack Welch.

Felton adds that middle managers who embrace change are exerting leadership by setting an example for their peers and direct reports. In doing so, they are also putting themselves in a better position for promotion to more senior levels.

As people grow as leaders, they are likely to find that their ability to lead requires a more sophisticated and less direct approach. “You have to find ways to influence people and inspire people around a vision,” says Handfield-Jones. “Then you have to shape that vision and shape the culture and values of your organization. You also have to have the fairly sophisticated leadership skill of making sure the leaders who report to you are themselves effective leaders to their people. So you’re reaching more broadly and more indirectly than your own immediate circle.”

And how, exactly, does someone with little or no managerial or supervisory experience go about taking that first step toward being a leader? “It simply involves an act of will,” says Useem. “You must simply decide, ‘I’m going to step forward to make a difference. I’m going to offer fresh insights and get people excited about where this company or organization ought to go.’ Leadership is a matter of personal commitment and drive..”

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